Qumu helps organizations around the world realize the greatest possible value
from video and other rich content they create and publish. Qumu's disc
publishing business provides customers with industry-leading systems that label,
archive, distribute and protect content on CDs, DVDs and Blu-ray Discs. The
Company also distributes related consumables for use with its disc publishing
systems, consisting of media kits, ribbons, ink cartridges and blank CD-R, DVD-R
and Blu-ray media. The Company markets its products to customers in North
America, Europe and Asia.

The Company's enterprise video content management software products are deployed
primarily through the sale of software licenses, software on a server appliance,
software-enabled devices and a cloud-based Software-as-a-Service (SaaS)
platform. Software maintenance contracts, professional services and managed
services are also sold with these solutions. The Company's disc publishing
business earns revenues through the sale of equipment, consumables and parts as
well as maintenance contracts, repair and installation services. Product
revenues on the accompanying Condensed Consolidated Statements of Operations
include the Company's sale of equipment, appliances, software-enabled devices,
consumables, parts and software licenses. Service revenues on the Condensed
Consolidated Statements of Operations include revenues from maintenance
contracts, repair, installation, software and maintenance subscription
arrangements, managed services and professional services. Qumu has no long-term
debt and does not require significant capital investment as it outsources to
third-party vendors the required fabrication of most of its hardware-related
products.

As previously announced, on April 24, 2014, the Company entered into an asset
purchase agreement with Equus Holdings, Inc. ("Equus Holdings") and Redwood
Acquisition, Inc. ("Buyer") pursuant to which the Company has agreed to sell to
Buyer all of the assets primarily used or primarily held for use in connection
with its disc publishing business. Buyer is a wholly-owned subsidiary of Equus
Holdings. The transactions contemplated by the asset purchase agreement are
referred to in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section as the "Asset Sale Transaction."
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For additional information on the asset purchase agreement and the Asset Sale
Transaction, please see the Company's Current Report on Form 8-K dated April 24,
2014 and Note 15 "Subsequent Events."
In this "Management's Discussion and Analysis of Financial Condition and Results
of Operations" section, the Company provides certain information relating to
trends in, and factors affecting, future revenue, gross profit margins,
operating expense and liquidity and capital resources. This information is
"forward-looking" and subject to the risks and uncertainties identified in
"Cautionary Note Regarding Forward-Looking Statements" below. Further, this
forward-looking information does not reflect the effect of any future sale of
the disc publishing business to Buyer or any other party or the effect of the
Asset Sale Transaction. This forward-looking information also does not
necessarily reflect the future financial performance of the Company or the disc
publishing business following the Asset Sale Transaction.

Enterprise Video Content Management Software. The $0.4 million decrease in total
enterprise video content management software revenues for the three months ended
March 31, 2014 consisted of a $0.9 million decline in sales of software licenses
and appliances, partially offset by a $0.4 million increase in service revenues.

The decrease in software license and appliance revenues was primarily due to the
timing of revenue recognition of contracted commitments. Revenues vary quarter
to quarter based on the type of contract the Company enters into with each
customer. Contracts for perpetual software licenses generally result in revenue
recognized closer to the contract commitment date while contracts for term-based
software licenses result in most of the revenue being recognized over the period
of the contract. The majority of contracted commitments from the fourth quarter
2013 and the first
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quarter 2014 were term-based licenses for which a high proportion of the
associated revenue will be recognized over future quarters. This significant
shift in the mix of software contracts reduced the amount of perpetual software
license revenue recognized in the first quarter. Contracted commitments for the
enterprise video content management software business for the first quarter in
2014 totaled $14.2 million and contracted commitment backlog aggregated $27.0
million as of March 31, 2014. The Company defines contracted commitments as the
dollar value of signed customer purchase commitments.

Disc Publishing. The current-year reduction in disc publishing revenues
primarily reflects declines of $0.1 million in equipment revenues and also
service revenues. The decrease in disc publishing equipment revenues was
primarily impacted by a reduced volume of Producer equipment sales in Europe,
partially offset by growth in equipment sales in the U.S. relative to the prior
year's comparable period. The overall decline in disc publishing equipment
revenues reflects a continuation of an expected transition of customers'
purchases over time from physical distribution of content on discs to online
forms of distribution.

Future consolidated revenues will be dependent upon many factors, including the
rate of growth of the Company's enterprise video content management software
business, whether software license arrangements with customers are structured as
term or perpetual licenses, which impacts the timing of revenue recognition, the
rate of technology substitution and associated decline in revenue for disc
publishing products, the success of the Company's deployment of a complete disc
publishing solution for medical imaging in hospitals in China and the rate of
adoption of other new applications for the Company's products in its targeted
markets. Other factors that will influence future consolidated revenues include
the timing of new product introductions, the performance of the Company's
channel partners, the timing of customer orders and related product deliveries,
the Company's ability to maintain continuous supply of its products and
components, the impact of changes in economic conditions and the impact of
foreign currency exchange rate fluctuations.

Gross Profit. Gross profit as a percentage of total revenues was 45.6% for the
three months ended March 31, 2014 compared to 47.4% for the same period in 2013.

The decrease in consolidated gross profit as a percentage of total revenues was
due to a decline in gross margin generated by the enterprise video content
management software business, partially offset by improved margins generated by
the disc publishing business. Gross profit as a percentage of revenues for the
Company's enterprise video content management software business was 35.4% for
the three months ended March 31, 2014, compared to 60.1% for the same period in
2013. The decline in gross margin for the software business was due to less
revenue from perpetual software licenses compared to the prior year, and
increased customer support and professional services costs required to support
growth in the customer base, deployment of a growing base of software contracts
and expansion of service offerings. Gross profit as a percentage of revenues for
the Company's disc publishing business was 48.2% for the three months ended
March 31, 2014, compared to 43.7% for the same period in 2013. The improvement
in gross margin was driven by reduced supplier costs for ribbons and certain
equipment, sales of higher margin consumables and reduced service costs,
partially offset by a reduced volume of sales of higher margin Producer
equipment.

The enterprise video content management software margins for the three months
ended March 31, 2014 and 2013 are inclusive of the impact of approximately $0.2
million in amortization expense associated with intangible assets acquired as a
result of the acquisition of Qumu, Inc. Cost of revenues in 2014 are expected to
include approximately $0.6 million of amortization expense for purchased
intangibles.

Future gross profit margins will be impacted by the rate of growth of the
Company's enterprise video content management software business, which has
historically generated higher gross margins than the Company's disc publishing
business. Future gross margins will also continue to be affected by many other
factors, including product mix, the timing of new product introductions, the
timing of customer orders and related product deliveries, changes in material
costs and supply sources, manufacturing volume, the growth rate of
service-related revenues relative to associated service support costs and
foreign currency exchange rate fluctuations.

Operating Expenses. Total operating expenses were $12.7 million for the three
months ended March 31, 2014 compared to $13.2 million in the comparable
prior-year period. The $0.5 million decline in operating expenses compared to
the prior-year period reflects the impact of cost reductions implemented in the
disc publishing business in 2013 which reduced expenses by $1.2 million,
primarily in research and development and sales and marketing. This decline was
partially offset by a $0.7 million increase in enterprise video content
management software operating expenses driven primarily by an increase in sales
and marketing expenses.

Research and development expenses totaled $2.7 million and $3.4 million for the
three months ended March 31, 2014 and 2013, respectively, representing 14.4% and
17.2% of revenues for the respective periods. Expense reductions in the
current-year period resulted primarily from headcount reductions implemented
during 2013 and reduced project spending in the disc publishing business. Lower
employee costs in the enterprise video content management software business also
contributed to the reduction in expenses in the current-year period due to the
timing of headcount additions.

Selling, general and administrative expenses totaled $9.9 million for the three
months ended March 31, 2014, or 52.5% of revenues compared to expenses in the
same prior-year period of $9.7 million, or 49.8% of revenues. The $0.2 million
increase in expenses
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in the current-year period primarily reflects increased sales and marketing
headcount and promotional programs to support growth in the enterprise video
content management software business, partially offset by reduced sales and
marketing expenses in the disc publishing business achieved as a result of the
prior-year headcount reductions and continued cost optimization. Also impacting
the increase in selling, general and administrative expense was the inclusion in
the first quarter 2014 of $0.2 million of transaction related expenses
associated with the Asset Sale Transaction.

Amortization of Purchased Intangibles. Operating expenses for the three months
ended March 31, 2014 and 2013 include approximately $0.2 million in each period
for the amortization of intangible assets acquired as part of the Company's
acquisition of Qumu, Inc. in October 2011. Operating expenses in 2014 are
expected to include approximately $0.6 million of amortization expense
associated with purchased intangibles, exclusive of the portion classified in
cost of revenues.

Other Income, Net. For the three months ended March 31, 2014 and 2013, the
Company recognized interest income on cash and marketable securities of $13,000
and $11,000, respectively, and recognized net losses on foreign currency
transactions of $35,000 and $107,000 for the respective periods. Additionally,
other income for the current year's first quarter included a one-time gain on
sale of property totaling $222,000.

Income Taxes. The provision for income taxes represents federal, state, and
foreign income taxes or income tax benefit on income or loss. The Company
recorded an income tax benefit of $49,000 and $54,000 for the three months ended
March 31, 2014 and 2013, respectively.

The tax benefit amounts recorded in the current and prior-year periods reflect a
tax benefit recorded in each period for losses incurred by the Company's
subsidiary in Europe, partially offset by U.S. state income taxes.

Net Loss / Net Loss Per Share. Resulting net loss attributable to Qumu for the
three months ended March 31, 2014 and 2013 was $3.9 million and $4.0 million,
respectively. Related net loss per basic and diluted share amounts were $0.45
and $0.46 for the three months ended March 31, 2014 and 2013, respectively.

Segment Operating Results
Management evaluates segment performance based on revenue and operating income
(loss). The operating income (loss) for the Company's enterprise video content
management software and disc publishing segments include all the direct costs of
each business and an allocation of corporate expenses incurred to support each
reportable segment.

Operating income (loss) for each reportable segment was as follows (in
thousands):
Enterprise Video
Content Management Disc
Reportable Segments Software (1) Publishing Total
Three months ended March 31, 2014
Operating income (loss) $ (6,650 ) $ 2,484 $ (4,166 )
Three months ended March 31, 2013
Operating income (loss) (4,687 ) 691 (3,996 )
(1) Operating loss for the enterprise video content management software
segment for the three months ended March 31, 2014 and 2013 includes
amortization expense of $0.3 million in each period for amortization of
intangible assets established as part of the acquisition of Qumu, Inc.

Enterprise Video Content Management Software. Operating loss increased $2.0
million during the first quarter of 2014 compared to the first quarter of 2013.

The increase in operating loss in the current year's first quarter was driven by
a $1.2 million decline in gross margin and a $0.7 million increase in operating
expenses. The decline in gross margin for the software business was due to less
revenue from perpetual software licenses compared to the prior year, impacted by
a higher mix of term-based arrangements relative to perpetual software license
arrangements. Further contributing to the decline in gross margin was an
increase in customer support and professional services costs required to support
growth in the customer base, deployment of a growing base of software contracts
and expansion of service offerings. These factors drove a decline in gross
profit as a percentage of revenues to 35.4% for the three months ended March 31,
2014 compared to 60.1% for the three months ended March 31, 2013. The $0.7
million increase in operating expenses was primarily due to an increase in sales
and marketing expenses and allocated corporate expenses. The increase in sales
and marketing expenses resulted from increased headcount and promotional
programs, partially offset by reduced sales commissions from lower sales. The
increase in allocated corporate costs was driven primarily by increased
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consumption of existing corporate resources to support the growth initiatives of
the enterprise video content management software business.

Disc Publishing. Operating income increased $1.8 million during the first
quarter of 2014 compared to the first quarter of 2013. Operating income in the
current-year's first quarter increased primarily due to a $0.5 million
improvement in gross margin and a $1.2 million reduction in operating expenses.

The improvement in gross margin was primarily driven by reduced supplier costs
for ribbons and certain equipment, sales of higher margin consumables and
reduced service costs, partially offset by a reduced volume of sales of higher
margin Producer equipment. The reduction in operating expenses occurred as a
result of headcount reductions during 2013 in research and development and sales
and marketing and reduced project spending in research and development. Also
contributing to the decline in operating expenses was a reduction in allocated
corporate costs as a result of the redirection of a portion of existing
corporate resources to support the increasing business requirements of the
enterprise video content management software business.

Liquidity and Capital Resources
The Company expects it will be able to maintain current operations and
anticipated capital expenditure requirements for the foreseeable future through
its cash reserves. At March 31, 2014, the Company had working capital of $46.0
million, down $2.8 million from working capital reported at December 31, 2013.

The primary contributors to the decrease in working capital were the generation
of a net loss adjusted for non-cash items during the three months ended March
31, 2014 of $3.1 million and purchases of property and equipment of $0.3
million, partially offset by proceeds from the sale of property and equipment of
$0.3 million and proceeds from the exercise of employee and director stock
options of $0.1 million. Exclusive of a small amount of capital lease
obligations and other purchase obligations, Qumu has no long-term debt and does
not require significant capital investment for its ongoing operations.

The Company's primary source of cash from operating activities has been cash
collections from sales of products and services to customers. The Company
expects cash inflows from operating activities to be affected by increases or
decreases in sales and timing of collections. The Company's primary use of cash
for operating activities has been for personnel costs and purchases of
inventory. The Company expects cash flows from operating activities to be
affected by fluctuations in revenues, personnel costs and inventory requirements
as the Company continues to increase its investment in resources to support the
growth of the enterprise video content management software business and
optimizes costs and reduces inventory purchases in line with revenues in the
disc publishing business.

Net cash used in operating activities totaled $4.5 million and $1.0 million for
the three months ended March 31, 2014 and 2013, respectively. The $3.5 million
increase in cash used in operating activities in 2014 relative to 2013 resulted
from a $1.2 million decrease in the favorable impact of non-cash and
non-operating items and $2.4 million in unfavorable changes in operating assets
and liabilities partially offset by a $0.1 million increase in net income.

Primarily contributing to the change in operating assets and liabilities
compared to the prior year were unfavorable changes of $2.2 million in
receivables, $2.2 million in accrued compensation and $1.0 million in prepaid
expenses and other assets, partially offset by favorable changes of $2.3 million
in deferred revenue and $0.8 million in trade accounts payable.

The unfavorable change in accounts receivable compared to the prior year was due
to timing of sales and associated collections from customers. The unfavorable
change in accrued compensation was primarily due to cash payments for
liabilities associated with the establishment in 2013 of a long-term incentive
plan and the achievement of above-target performance under the Company's
short-term incentive plan for 2013, with associated payments under both plans
occurring in the quarter ended March 31, 2014. The unfavorable change in prepaid
expenses and other assets was due to an increase in and related deferral of
software royalties, software licenses and hardware costs directly associated
with revenues that have not yet been recognized as of March 31, 2014. The
favorable change in deferred revenue in the first quarter of 2014 compared to
the same period in 2013 was primarily due to an increase in renewals of
maintenance contracts for the retail segment of the Company's disc publishing
business and by an increase in software related revenue deferrals for the
Company's enterprise video content management software business, impacted by a
higher mix of term-based software license arrangements relative to perpetual
license arrangements.

Net cash provided by (used in) investing activities totaled $(5.0) million and
$9.9 million for the three months ended March 31, 2014 and 2013, respectively.

The net cash of $(5.0) million used in 2014 was driven primarily by $5.0 million
in purchases of marketable securities, net of related maturities, and $0.3
million in purchases of property and equipment, partially offset by $0.3 million
of proceeds from the sale of a parcel of land from the Company's headquarters
property. The $9.9 million cash provided in 2013 was driven primarily by $10.5
million of maturities of marketable securities, net of related purchases,
partially offset by $0.2 million in purchases of property and equipment and a
$0.4 million investment in BriefCam. Capital expenditures in 2014 and 2013
consisted primarily of office equipment to support information technology
infrastructure.

Financing activities provided (used) net cash of $0.1 million and $0.0 million
in 2014 and 2013, respectively. The net cash provided in 2014 was due to
proceeds from stock option exercises.

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Since October 2010, the Company's Board of Directors has approved common stock
repurchases of up to 3,500,000 shares. Shares may be purchased at prevailing
market prices in the open market or in private transactions, subject to market
conditions, share price, trading volume and other factors. The repurchase
program has been funded to date using cash on hand. The Company did not
repurchase any shares of its common stock during the three months ended March
31, 2014 and 2013, respectively. As of March 31, 2014, the Company had 778,365
shares available for repurchase under the authorizations.

The Company did not declare or pay any dividends during the three months ended
March 31, 2014 and 2013, respectively.

Critical Accounting Policies
Management utilizes its technical knowledge, cumulative business experience,
judgment and other factors in the selection and application of the Company's
accounting policies. The accounting policies considered by management to be the
most critical to the presentation of the condensed consolidated financial
statements because they require the most difficult, subjective and complex
judgments include revenue recognition, allowance for doubtful accounts,
inventory provisions, deferred tax asset valuation allowances, accruals for
uncertain tax positions, stock-based compensation, impairment of long-lived
assets and investment in nonconsolidated company. These accounting policies are
discussed in Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the Company's Annual Report on Form 10-K
for the year ended December 31, 2013. Management made no significant changes to
the Company's critical accounting policies during the three months ended March
31, 2014.

In applying its critical accounting policies, management reassesses its
estimates each reporting period based on available information. Changes in such
estimates did not have a significant impact on the Company's condensed
consolidated financial statements for the three months ended March 31, 2014.

Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements that involve risks and
uncertainties. For this purpose, any statements contained in this report that
are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, words such as "may," "will,"
"expect," "believe," "anticipate," "estimate" or "continue" or comparable
terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties. The
Company's actual results could differ significantly from those discussed in the
forward-looking statements.

Factors that could cause or contribute to such differences include, but are not
limited to, the following, as well as other factors not now identified: the
Company's ability to successfully implement its growth strategy; the economic
health of the markets from which Qumu derives its sales and, in particular, the
strength of the economies within North America and Europe where the Company has
averaged nearly 90% of total sales over the past three years; the Company's
ability to keep pace with changes in technology in the Company's targeted
markets; increasing competition and the ability of the Company's products to
successfully compete with products of competitors; the mature market for disc
publishing products, with limited growth potential; the ability of the Company's
newly developed products to gain acceptance and compete against products in
their markets; the return on the Company's investment in strategic initiatives
may be lower or develop more slowly than expected; the significance of the
Company's international operations and the risks associated with international
operations including currency fluctuations, local economic health and management
of these operations over long distances; the Company's ability to protect its
intellectual property and to defend claims of others relating to its
intellectual property; risks related to open source software incorporated into
Qumu's products; the Company's ability to effectively market its products and
serve customers through its value-added resellers, distributors, strategic
partners and its own sales force; the ability of the Qumu products to deliver
fast, efficient and reliable service; the Company's ability to maintain adequate
inventory of products; the Company's ability to secure alternative sources of
supply given its reliance on single source suppliers for certain key products;
the ability of the Company's products to operate effectively with the computer
products developed and to be developed by other manufacturers; the compatibility
of the Company's disc publishing products with products designed by others; the
negative effect upon the Company's business from manufacturing or design
defects; the effect of U.S. and international regulation; fluctuations in the
Company's operating results; the Company's dependence upon its key personnel;
the volatility of the price of the Company's common stock; the negative effect
on the Company's common stock price of future sales of common stock; provisions
governing the Company relating to a change of control, compliance with corporate
governance and securities disclosures rules and other risks, including those set
forth in the Company's reports filed with the Securities and Exchange
Commission, including Item 1A of Part I of the Company's Annual Report on Form
10-K for the year ended December 31, 2013. These forward-looking statements are
made as of the date of this report and the Company assumes no obligation to
update such forward-looking statements, or to update the reasons why actual
results could differ materially from those anticipated in such forward-looking
statements.